BRICS warn global economy faces ‘risks’
March 28, 2013, 2:48 pm

BRICS nations said on Wednesday that significant risks remain and the performance of the global economy still falls behind their expectations.

“Uncertainty about strength and durability of the recovery and the direction of policy in some major economies remains high,” Brazil, Russia, India, China and South Africa said in a joint communiqué released after the conclusion of the 5th BRICS Summit in Durban.

BRICS nations said some of the policy actions taken in Europe, the United States and Japan that are aimed at reducing tail-risks in the world economy “produce negative spillover effects on other economies of the world.”

Central banks in advanced economies have responded with unconventional monetary policy actions which have increased global liquidity, the communiqué said.

BRICS countries are worried about spillover from such crisis areas as Cyprus were austerity measures have been unpopular [Getty Images]

Major central banks “should avoid the unintended consequences of these actions in the form of increased volatility of capital flows, currencies and commodity prices, which may have negative growth effects on other economies, in particular developing countries,” the communiqué said.

The BRICS nations reaffirmed their strong commitment to support growth and foster financial stability, and also underscored the need for appropriate action to be taken by advanced economies in order to rebuild confidence, foster growth and secure a strong recovery.

In the communiqué, the emerging economies expressed concerns over the slow place of the reform of the International Monetary Fund.

They called for the reform of international financial institutions to make them more representative and to reflect the growing weight of BRICS and other developing countries.

57 founding members, many of them prominent US allies, will sign into creation the China-led Asian Infrastructure Investment Bank on Monday, the first major global financial instrument independent from the Bretton Woods system.

Representatives of the countries will meet in Beijing on Monday to sign an agreement of the bank, the Chinese Foreign Ministry said on Thursday. All the five BRICS countries are also joining the new infrastructure investment bank.

The agreement on the $100 billion AIIB will then have to be ratified by the parliaments of the founding members, Chinese Foreign Ministry spokesman Lu Kang said at a daily press briefing in Beijing.

The AIIB is also the first major multilateral development bank in a generation that provides an avenue for China to strengthen its presence in the world’s fastest-growing region.